Global stock markets were shored up Thursday by suggestions from Federal Reserve Chair Janet Yellen that the central bank may slow the pace of its interest rate increases if inflation remains relatively subdued. The dollar recovered its poise after stuttering in the wake of Yellen’s remarks.
KEEPING SCORE: In Europe, the CAC 40 in France was up 0.5 percent at 5,249 while Germany’s DAX rose 0.1 percent to 12,632. The FTSE 100 index of leading British shares was flat at 7,418. U.S. stocks were poised for a steady open too with Dow futures and the broader S&P 500 futures up 0.1 percent.
FED TALK: Yellen’s comments to Congress assuaged concerns among some traders that the Fed was raising interest rates too quickly in the face of stalling inflation and sluggish U.S. economic growth of just 1.4 percent in the first quarter. Many economists believe the Fed, which has raised rates three times since December, will increase rates one more time this year. “Monetary policy is not on a pre-set course,” Yellen told lawmakers on the House Financial Services Committee. “We’re watching it very closely and stand ready to adjust our policy if it appears that the inflation under-shoot will be persistent.” The comments pushed the Dow up 0.6 percent to 21,532.14, a record high, but weighed on the dollar as traders priced in the potential for rates not to rise as rapidly as previously thought. She is due to address a Senate committee on Thursday too but observers don’t expect anything more dramatic to emerge.
ANALYST TAKE: “The question now is whether Yellen reiterates the point in today’s testimony, adds further color to it or possibly backtracks on it,” said Craig Erlam, senior market analyst at OANDA.
CHINA TRADE: Chinese trade growth accelerated for a second month in June in a positive sign for global demand and the world’s No. 2 economy. Exports rose 11.3 percent to $196.6 billion in June, up from May’s 8.7 percent rate, and imports gained 17.2 percent to $153.8 billion, up from the previous month’s 14.8 percent growth. The unexpectedly strong export demand could help to support growth that is forecast to weaken as Beijing tightens bank lending controls to reduce the risks of rising debt.
ASIA’S DAY: Japan’s Nikkei 225 stock index was flat at 20,099.81 and Hong Kong’s Hang Seng index jumped 1.2 percent to 26,345.27. The Shanghai Composite index climbed 0.6 percent at 3,218.16 and the S&P ASX 200 advanced 1.1 percent to 5,736.80. South Korea’s Kospi gained 0.7 percent to 2,409.49. Shares in Southeast Asia and Taiwan were mostly higher.
ENERGY: Benchmark U.S. crude fell 31 cents to $45.18 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, used to price international oils, fell 30 cents to $47.44 per barrel.
CURRENCIES: The euro fell 0.1 percent to $1.14 while the dollar was down 0.1 percent at 113.09 yen.